FDI Firestone Diamonds Plc

RNS Number:7134C
Firestone Diamonds PLC
10 May 2006

                             Firestone Diamonds plc



         Buffels River mine development agreement signed with De Beers



LONDON:  10 May 2006



SUMMARY

* Development of new mining operation with De Beers on Buffels River
  in South Africa

* Target production of over 600,000 carats over 6 years

* Minimum estimated annual revenue to Firestone of #3.7 million and
  operating profit of #2 million

* Significant upside potential through increased plant throughput,
  profit sharing arrangement and increase in mineable resources

* First production and cash flow expected in June 2006



On 31 March 2006, Firestone Diamonds plc ("Firestone" or "the Company"), the
AIM-quoted diamond mining and exploration company, announced that Firestone and
its black-empowerment joint venture company, African Star Minerals ("African
Star"), had entered into a Memorandum of Understanding with De Beers
Consolidated Mines ("De Beers") to cooperate on the development of a new mining
operation on the Buffels River in Namaqualand, South Africa.  The Company is
pleased to announce that a formal agreement has now been signed with De Beers.
The new mining operation will be developed around Firestone's Bonte Koe Mine,
which is operated by African Star, and will exploit the Buffels Inland Complex
("BIC") deposits, over which De Beers holds mining rights.



Philip Kenny, CEO of Firestone Diamonds, commented: "This agreement with De
Beers marks a major milestone for Firestone Diamonds and African Star Minerals.
It provides us with significant assured revenue and cash flow for the duration
of the Buffels River project and substantially extends the life of our
operations at Bonte Koe.  In addition, having proven that we have the capability
to design, build and operate efficient, cost effective mining operations to the
standard required by De Beers, we intend to expand our relationship with De
Beers and investigate other known resources in the Namaqualand region that we
can jointly exploit with them."



Project Overview

The agreement has come about as a result of the substantial investment that
Firestone has made in plant and infrastructure at Bonte Koe, which includes a
150 tonne per hour gravel processing plant, a 16 km power line and a 35 km
process water supply pipeline.



Under the terms of the agreement, Firestone will use the plant and
infrastructure at Bonte Koe to process diamondiferous gravel mined by De Beers
from the BIC.  The BIC comprises two deposits located adjacent to Bonte Koe, and
two located further downstream.  Mining operations on the BIC are expected to
produce over 600,000 carats from approximately 5.5 million tonnes of gravel over
a six year period.



Financial arrangements

Under the terms of the agreement, De Beers will be responsible for overburden
stripping and gravel mining and for the delivery of gravel from the BIC to Bonte
Koe.  Firestone will be responsible for processing the gravel, producing a DMS
concentrate, and disposal and rehabilitation of tailings from the operation.
The DMS concentrate will be transported for diamond recovery at De Beers'
Kleinzee Mine, which is located at the coast 15 km downstream of Bonte Koe.



African Star will be paid approximately R40/tonne per tonne of gravel processed
for the 5.5 million tonnes of gravel projected to be mined over the life of the
project.  This rate will cover Firestone's capital and operating costs in
respect of the project.  With an agreed minimum gravel delivery rate of 950,000
tonnes per annum, this will provide estimated annual revenues to Firestone of
approximately #3.7 million and operating profits of approximately #2 million
over the life of the project.  With estimated maximum plant capacity of
1,250,000 tonnes per annum, Firestone's annual revenues could increase
substantially if De Beers' mining rate exceeds the current minimum planned
level.



The agreement also has a profit sharing provision under which Firestone will
have the right to participate in profits generated by the project once De Beers'
target return from the project has been reached.  There is further potential for
Firestone's revenues and profits from the project to increase significantly, as
it is expected that resource evaluation work currently being carried out by De
Beers in the BIC area and continued increases in rough diamond prices will
result in substantial additional mineable resources being identified in the BIC
area.



Project Schedule

Under the terms of the agreement, Firestone will be required to make a number of
modifications to the Bonte Koe plant, including upgrading of the DMS capacity
and the crushing circuit.  Planning and design work for the modifications were
completed in the first quarter of 2006.  Site works commenced in March and are
now well under way.  As these modifications will not require the existing plant
to be shut down, Firestone and De Beers plan to process gravel from the BIC
through the existing plant as soon as possible, with the objective of commencing
treatment in June 2006.



With the plant at Bonte Koe now being dedicated to processing the significantly
larger volume of BIC gravel resources for the expected six year life of the
project, Firestone plans to resume exploiting its own gravel resources at Bonte
Koe after processing of the BIC gravels has been completed.



For further information:

Philip Kenny, Firestone Diamonds                       +44 20 8834 1028 / 
                                                       +44 7831 324 645
Leesa Peters, Conduit PR                               +44 20 7429 6600 / 
                                                       +44 7812 159 885
Jamie Cumming, Bell Lawrie                             +44 141 314 8103 / 
                                                       +44 7768 044 620



                           www.firestonediamonds.com







Background information on Firestone Diamonds plc:

Firestone Diamonds plc is an international diamond mining and exploration
company with operations in the Namaqualand region of South Africa, Botswana and
the United States.



Firestone has extensive interests in Botswana, which is the world's largest
producer of diamonds, with annual production of approximately 30 million carats
worth over $2.5 billion.  Botswana is considered to be one of the best countries
in the world to explore for kimberlite - the primary source rock for diamonds.
Firestone's Mopipi, Orapa and Jwaneng projects are located close to the major
Orapa and Jwaneng mines and are all being explored by De Beers in joint venture
with Firestone.  Firestone is also exploring for kimberlite in the US on the
Laurentia craton, which extends into Canada, where it hosts a number of
diamondiferous kimberlite deposits.



Namaqualand, which is located on the west coast of South Africa, has been one of
the world's largest alluvial diamond producing regions for the past 60 years,
with total production to date estimated to be worth more than $3 billion.
Firestone's mining operations in Namaqualand include the Bonte Koe, Avontuur and
Oena Mines, all of which produce high quality alluvial diamonds, and a growing
portfolio of early stage and advanced exploration projects, of which the Groen
River Valley project, which is being explored by De Beers in joint venture with
Firestone, is the most important.



Firestone has a highly qualified management team with extensive experience in
the exploration, evaluation and development of diamond projects. Firestone is
quoted on the Alternative Investment Market (AIM) of the London Stock Exchange
and trades under the symbol FDI.L.




                      This information is provided by RNS
            The company news service from the London Stock Exchange
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